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Australia’s big banks are dominating the home lending space, sparking renewed concerns about the competitiveness of the mortgage market.
Non-bank lenders’ market share more than halved in the March quarter, figures from the ABS have revealed, while banks’ market share rose by 1.5 per cent.
According to the ABS the banks' share of the $1.2 trillion mortgage market climbed to 91.5 per cent in March, up from 89 per cent in December 2010. In the same period, non-bank lenders' market share dropped from 2.7 per cent to just 1.2 per cent of Australian mortgages.
Credit unions and building societies also lost ground to the banks, falling from 8.3 per cent in December to 7.4 per cent in March.
Non-bank lenders were synonymous with bringing competition and lower rates to the mortgage market in the late 1990s, through lenders such as Aussie and Wizard. They peaked with a market share of 15.2 per cent in 2003, having taken business from the banks, which by 2003 had a share of just 76.9 per cent.
"The non-banks brought a lot of competition to the mortgage market," said Phil Naylor, chief executive of the Mortgage and Finance Association of Australia (MFAA).
"They found ways to lower their interest rates and create incentives for home buyers to borrow from them.”
To see the non-banks falling to almost one per cent of market share, is worrying from a competition point of view, Mr Naylor said.
Global financial problems associated with the GFC had curtailed the non-banks' funding model, leaving home lending to institutions that took deposits, he said.
However, the government's decision in November to ban the 'deferred establishment fee' used by non-banks, had coincided with non-banks experiencing a market share fall from 3.3 per cent to 1.2 per cent in just five months.
"The current trends should be worrying for consumers."